Pigouvian Tax
A tax set equal to the marginal social cost of a negative externality, designed to make producers internalize a harm they previously imposed on third parties for free. Carbon taxes, tobacco taxes, congestion pricing, and alcohol excise taxes are all Pigouvian. The standard economic prescription for negative externalities; named for early-20th-century British economist Arthur Pigou. Investors should treat industries with large unpriced externalities as carrying probability-weighted future-Pigouvian-tax liability.
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